Cement Prices Worldwide

Asia Cement Holding Starts Trading on 20th May

2008-05-18T22:37:00.002+02:00

HONG KONG (XFN-ASIA) - Asia Cement (China) Holdings (743.HK), the mainland unit of Taiwan's Asia Cement Corp, has priced its initial public offering (IPO) in Hong Kong at 4.95 hkd per share, near the low end of an indicated price range of 4.85-6.45 hkd, according to a market source.

The retail tranche of the IPO has been four times subscribed, the source said.

Based on the offer price of 4.95 hkd, the company could raise 1.86 bln hkd from the sale of 375 mln shares.

The shares will begin trading on May 20.

Expect this Cement stock to trade up to 8.00 HKD minimum on Tuesday. Good luck Traders!

World Cement Report: Now to 2020

2007-09-19T23:18:00.000+02:00

World consumption of cement is forecast to continue to increase throughout the next 15 years, taking the annual volume up from the 2283mt of 2005 to around 3130mta by 2015, and 3560mta by 2020, representing overall forward expansion of approximately 56%
According to the 203-page Report "GLOBAL CEMENT to 2020"*, world production and consumption of cement approximated 2283mt in 2005, this level representing an increase of approximately 5.75% (124mt) on the previous year, and a continuation of the annual underlying expansion which has seen year-on-year growth in almost every year since the 1970s. In tonnage terms, the past half-decade witnessed a global expansion of 633mt, with almost 70% of this overall growth (440mt) coming from East Asia alone, with 76mt from other Asian countries. Other regional expansion includes 7mt for C/S America, 44mt for Africa/Middle East, 48mt for Europe, and 20mt for North America. The volume of cement entering world trade has traditionally been low relative to overall production and consumption - typically accounting for approximately 6-7% in aggregate terms (6.8% in 2005). This is linked to the low unit value of cement, the widespread availability of raw materials, and the link between economic growth and cement consumption - all these factors favouring domestic production rather than import dependence. Trade volumes have risen almost continuously over the past 35 years, advancing from 20mta in 1970 to 71mta by 1990 and a 2005 total of 155mt. Most recently, year-on-year growth approximated 7.7% in 2004 and almost 6% in 2005 – linked to US import growth, but also supported by high volume trade within Europe, the Middle East, and Asia. This trade growth – summing 19mt (14%) in 2 years – occurred against a background of unprecedented increases in shipping costs. Within the latest trade total, finished cement trade approximated 107.2mt, with approximately 47.6mt of clinker moved internationally. There has been a shift towards greater significance for clinker within the trade aggregate recently – linked to a number of factors, largely market-specific, as well as to the increased involvement of the multinationals in cement capacity ownership throughout the world. On a regional basis, 2005 saw totals of 37mt imports and 47mt exports for Europe - including high volumes of intra-European trading (often non-seaborne). Within Asia, S/E Asia and E Asia account for a high share of world exports (15.5% and 23% respectively in 2005), although exports from SW Asia (mainly India) have increased in recent years. Elsewhere, North America (USA) is a major import market, whilst Africa and the Middle East play a significant role in both world exports and imports.For future cement markets, there are very different forward patterns of growth expected for individual regions. Thus, for the main individual regions total forward growth ranges from 1% for North America to over 70% for SW Asia and parts of Europe, and to over 90% for SE Asia. At the global level, 5-year expansion is expected to approximate 19.75% in 2005-10, slowing to 14.5% in the next half-decade and 13.75% in 2015-20. Above average growth is anticipated for SE Asia and SW Asia in each of the halfdecades, with growth approximating 29%, 23.5% and 19.25% respectively for the former. Cement demand in Africa is also expected to be above average in each period, with halfdecade performance of over 21% growth for 2005-10, slowing to 13.8% in 2015-20. A similar profile is recorded for Latin America, whilst for North America, the dominance of the US in the regional profiles dictates a net advance of almost 13.5% in 2005-10, but a contraction of 6.4% and 4.5% in the subsequent half-decades. Growth in the EU 15 is also expected to be well below the world average, whilst for Other Europe the growth performance is expected to approximate over 25% in 2005-10, slowing to 14.7% in 2015-20.Of the total 1280mt forecast increase in world cement consumption, over 72% is set to occur in Asia – with volume increases of 710mt for East Asia, 109mt for SW Asia and 111mt for SE Asia.The Study includes a set of alternative forward scenarios :-In the Low Case, the world cement consumption aggregate is projected to grow only marginally in the near-term, followed by more significant growth thereafter. The global total is projected to reach over 2440mt by 2010, and 2995mta by 2020 - representing overall forward expansion of just over 31%.In the High Case, the profile is somewhat different, in that average annual expansion is expected to be relatively high over the near/medium-term, slowing thereafter. In tonnage terms, this translates to a projected level of around 3075mta by 2010, rising to 4220mta by 2020. Total forward growth approximates 85%.The development of future cement trade volumes will continue to be dominated by essentially short-term import requirements, set against an underlying background of clinker import dependency and other long-term supply patterns. Trade volumes will remain highly susceptible to cost and availability factors, with any major shift in shipping costs being of potential primary significance in this regard, as witnessed in the past 2-3 years. The continuing consolidation of the cement industry at the global level – in terms of capacity ownership by the cement majors – will continue to act as a restraint on imports in some markets and will encourage trade in others. The very nature of the cement trade suggests continued significant year-on-year volatility for individual markets and potentially at the aggregate trade level throughout the study period. This will continue to be exacerbated by any major movement in shipping costs through bulk carrier freight rates.In 203 pages, the highly detailed and extensive new report contains analysis of cement production, consumption, imports & exports for individual countries throughout the world. The Report includes detailed forecasts of developments throughout the period to 2020, and is essential reading for all parties with an interest in the future development of the cement industry.

Serious Shortage of Cement in Nigeria

2007-09-10T11:56:00.000+02:00

NIGERIA: The Minister of Commerce and Industry, Mr Charles Ugwu, has in Abuja predicted that demand for cement in the country will rise to approx. 17 million tonnes in 2008.
“Unfortunately, as of today, only about four million tonnes are being produced locally, though production will push up to about seven million tonnes with the new capacity being built.
Ugwu, who gave these figures at a meeting with stakeholders in the industry said: “Yet a deficit of about 10 million tonnes of cement is recorded”.
He said government would allocate the shortfalls to investors in the downstream sector to import.
“Blending of the cheap imported clinker with the locally manufactured cement will allow Nigerians to enjoy better prices, “ he said.
He said the meeting was a working session where every stakeholder had an opportunity to explain specific problems of the sector to address both supply and price issues.
“I have read the files and heard the situation in the industry, the president has called me and said the situation must change rapidly,” Ugwu said.
The Minister said government was aware of the agony faced over road transportation and other logistics, adding that the president was committed to seeing major improvements in the provision of vital infrastructure.
“But the president has expressed a great deal of anxiety that in every commodity where government has intervened to support local manufacturers, things have always turned for the worse, rather than getting better.”
“When we look at sugar, cement, flour and other areas where government had tried to restrict import in order to give fair opportunities for local manufacturers, prices have skyrocketed, “ he added.
He said noticeable shortages had developed in a way that could make one question the logic of the incentives that were given.
“Everyone here has the responsibility to ensure that the supply is good, regular, adequate and that prices are fair, so that both the consumer and supplier will have fair returns.

Thankfully, restrictions on importing cement have now been lifted. Yes Mr. President...stop meddling. Closing down factories DOES NO GOOD.

Temporary Measures in Malawi Cement Imports

2007-09-07T22:36:00.000+02:00

MALAWI: Über Cement producer Lafarge Portland says it will investing $75-million in a new limestone-mining project at Chenkumbi Hills, in Malawi’s southern district of Machinga. The cement manufacturer, which has been importing clinker and gypsum from Circle Cement, of Zimbabwe, says it is moving fast to start production at the Chenkumbi mine as soon as possible because the continuing economic crisis in Zimbabwe is leading to “unstable prices and a shortage of the raw materials”. “The situation looks grave,almost irreperable, and there are no signs of an immediate solution. We are not even sure whether the clinker that trickles from Zimbabwe will continue and suffice for an average monthly requirement of 17 000 MT" says Lafarge Portland Malawi commercial manager Nesta Msowoya. Lafarge Portland started importing clinker from Zimbabwe in November 2002, when it closed its Changalume limestone mine after a survey had revealed that the mine no longer had enough commercially mineable deposits. Msowoya says dwindling supplies of clinker from Zimbabwe have obliged them to start importing from China.“This decision is also not at all favourable because it has increased landed costs by 38%, thereby leading to a 14% cement price hike by the company,” explains Msowoya .He says Lafarge is fast-tracking the development of the mine at Chenkumbi so that it becomes operational in 2009. Meanwhile, the Malawi government has removed restrictions on the importation of cement, which it put in place in 2000, after Lafarge Portland and Shayona Cement complained about “unfair” competition posed by cheap imports from Zimbabwe. Malawi’s Trade and Industry Minister, Ken Lipenga, says the government has removed the restrictions owing to the current shortage of cement.“The shortage of cement in the country has come at a time when there is a lot of construction work(think World Cup Infrastructure). We have, therefore, resolved to open the gates to anyone who wants to import cement into the country.“This implies that importers will no longer have to seek licences to import cement. It should be noted that this is only temporary measure, which will be reviewed once the situation gets back to normal,” says Ken Lipenga. A bit unusual.

A Little Cement Education for the Future Cement Trader

2007-08-24T08:49:00.000+02:00

1. Don't Start By Sourcing Your Cement on Alibaba. Alibaba can be a great resource but there are too many jokers/losers wanna be cement agents lurking there. All the cement prices you see there are far too low.
2. There is a Cement Shortage EVERYWHERE. Europe is short cement, Africa is short cement. This is your basic first economics class: low supply + high demand = high cost.
3. Cement from China can be obtained...again be wary of the con...and you never know: there is a lesson to be learned from the lead laden Barbie doll story. Get a good contact on the ground that speaks your language.
4. The price of cement itself at the factory door may not be expensive...but did you think a cement carrier was cheap? Easy to get your hands on? They aren't fueled by thin air. The cost of such a vessel varies daily as well.

Lesson Over

To be Frank: I don't earn my keep from this blog. I trade commodities (especially cement) and I represent a few Chinese cement factories. I am happy to give further assistance. Post a message if you want. I don't post my email here anymore. There is too much junk that lands in my inbox when I do.

Not All Ports Are Deep Enough for Cement Carriers

2007-08-23T11:07:00.000+02:00

This is what happens when the port isn't deep enough. Cement is offloaded onto barges.

Why Nigerian Cement Prices Won't Crash Anytime Soon

2007-08-21T21:39:00.000+02:00

NIGERIA: Over a month ago construction experts predicted a cement price crash in Nigeria when President Umaru Musa Yar'Adua yesterday ordered the re-opening of Ibeto Cement Factory in Port Harcourt, Rivers State.
This was considered a major step to break the oligopoly enjoyed by some cement manufacturers and importers.

The factory was shut down by former president, Chief Olusegun Obasanjo, allegedly to protect the interest of his allies in the cement industry.

The chairman of the re-opened company, Chief Cletus Ibeto, has pledged to flood the market with quality cement in the next forty days, saying this would result in the crashing of price of cement.

40 days ago cement prices in Nigeria ranged from USD12.00 to USD 15.00 per bag depending on the location in the country. Today, when the ships were supposed to come in, prices range from USD20.00 to USD25.00 per 50 kilo bag.

The destruction of local efforts of manufacturing cement was predicted by the president of the Manufacturers Association of Nigeria (MAN), Alhaji Bashir Borodo. This seems a bit farfetched as prices have continued to go up and the demand for cement is estimated at over 13 million metric tonnes P.A....

Ibeto says they can roll out 1.5 million tonnes PA ( just over 10% of what is needed)

Local production, can at best, handle 10 million tonnes PA...so Nigeria will still be short at least 1.5 million tons. We don't see any price relief about to happen especially with shipping costs set on a firm upward trend and neighbouring countries with high cement demands and shortages on the horizon unless one of the following happens:
1. Ibeto increases capacity and imports more
2. Other cement importers are allowed to reopen (do they exist?)
3. nnnmm don't have one.

So, Chief Ibeto ( I want that name), What gives? It's your turn. Make some hay while the sun is shining (considering that CIF USD125.00 per MT could be achieved CIF if you were in touch with the right people)

Happy to help.

Italcement Extends It's Reach

2007-08-20T22:41:00.000+02:00

Italcementi SpA has just made an offer to buy 51 percent of Kuwait's Hilal Cement Company in a move that would expand the reach of Italy's largest cement maker to 21 countries.

The offer of US$2.60 per share, which was made through Italcementi's Egyptian subsidiary Suez Cement Company, values the company at US$89 million (€66.15 million). It has been approved by the Kuwait Stock Exchange.

Italcementi recently bought the Fuping Cement in China as part of its strategy to grow in emerging countries.

Hilal has a capacity to produce about 1 million metric tons of cement a year, and in 2006 had revenues of around US$65 million.

If You Are or Want to Be a Cement Trader You Must Have These

2007-08-20T19:22:00.000+02:00

It's one thing to Trade...but you really trade so much better if you know what you're talking about. Read these or at least keep them on your book shelf, seriously:

Lea's Chemistry of Cement and Concrete, Fourth Edition

Cement Chemistry, second edition

Cement Trader on the Road in China

2007-08-20T18:56:00.000+02:00

Shandong Province; Yes it has been a long time since my last post, but between typhoons, missed planes, trains and taxis and dodgy salesmen/agents I'm lucky to be posting today. So the factory I've visited here (name not mentioned until all is signed, done and dusted) is miles more professional than anything I've seen in Ningbo, although Ninbo may be revisited depending on what's on offer.

So what I've learned from my recent China factory tours:

unless you are on a cement factory tour give Shandong a raincheck or a full on miss.
bring lots of shampoo...cement does not get out of your hair.
do not get drunk with the locals.

I'm not saying much of note in this post because deals are pending and really it would be too early to let the cement out of the bag.

Hopefully in the next few hours I can update on world cement issues, scandal, prices etc..which are as usual happening in India, China, Africa and for a change New Zealand.

Stay posted.

Cement Growth in Africa

2007-08-10T13:08:00.000+02:00

CEMENT sales in the Southern African Customs Union rose 7,6% in July as builders accelerated work on roads and infrastructure needed for the 2010 Fifa World Cup.
Sales in South Africa, Lesotho, Botswana, Namibia and Swaziland rose to 1,38m metric tons from 1,28m tons a year earlier, Cement & Concrete Institute Marketing Manager John Sheath said in an interview yesterday.
The Government has awarded more contracts for roads, stadiums and rail projects needed for the world cup, which it's hosting for the first time. Cement purchases by civil engineering companies such as Murray & Roberts have climbed 22% this year, almost double the pace of the wider market, Sheath said.
"It's very much non-residential activity and infrastructure spending by the government," Sheath said. Members of the institute include Lafarge SA and Holcim, the world's biggest cement companies. The others are Portugal's Cimpor-Cimentos de Portugal SGPS SA and Pretoria Portland Cement, Africa's largest cement producer. Much of the cement is imported as well there just is not enough production capacity in Africa.
A big question is whether this growth will be sustained beyond 2010 as all of the growth is non housing related.
This leads me to comment on the fact that all cement news seems to be focused on Africa, India, China, Malaysia. Is this because we aren't building in Europe and in North America? Or are we self sufficient?

Still in Ningbo China

2007-08-09T11:38:00.000+02:00

NINGBO CHINA: It's hot. Soooooo hot and this is the hotel I'm staying in: Mirage Hotel Ningbo. Nothing special. On the food front I found a decent restaurant across the street from the Sheraton. I can't remember anything else...am a bit zonked out. They serve Szechuan food.

I had my first meeting with the factory reps yesterday. I'm shocked and flabbergasted. I really think these may have been a couple of lying agents. They did not want to show me the cement factory!
How can I buy cement from them and recommend them to my clients if I can't see the factory. I'm meeting them again today and hopefully they will pull through and my first impression is wrong.

Live from Ningbo China

2007-08-08T14:46:00.000+02:00

Ningbo China: Today live from Ningbo (I won't go into detail as to how hard it is to get here and how you really don't want to make this trip) I will be bringing you cement news as I go visit two of my suppliers in the netherlands of China (you will possibly get a post about interesting foods from Ningbo in the next few days).

The Ningbo port is one of the largest in China and it exported 93,600 tons of cement in the first five months of 2007, worth US$3.508m.

Pictured at right is an ultra large 400'000 ton carrier docked at the Ningbo dock. It doesn't carry cement. It's a Saudi Arabian crude oil carrier. They don't come any bigger than that. More news from Ningbo tomorrow.

Cement Trucks On Ebay

2007-08-08T09:06:00.001+02:00

First I have to admit that I am Dora the Explorer when it comes to browsing the internet and on top of it just slightly addicted to Ebay.
I have absolutely no need for a cement truck as I simply buy and sell cement (and here comes the but) but this just amused me so much I had to post it. You can buy a 1984 Peterbuilt Cement Mixer truck for USD 19500. She's a beauty and a bargain. Plenty more of these on Ebay and they ship worldwide according to the seller.

More serious posts available later.

Don't let them fool you: 3 Lies found in B2B sites

2007-08-08T00:21:00.000+02:00

This is a typical cement entry found on Alibaba, EC2 (find the 3 obvious lies below the entry):

We work directly with a 100% Reliable Supplier. Proven track record, selling over 8 M MT per month. CEMENT: 42.5
N/R All Prices in USD, CIF ASWP,
Transferable LC QUANTITY in MT RDLC
12,500 & above 72
25,000 & above 70
50,000 & above 68
75,000 & above 66
100,000 & above 64
150,000 & above 63
300,000 & above 61
500,000 & above 59
750,000 & above 58
For grades 52.5 add usd 3.00/mt to the above list Payment: Irrevocable, confirmed, revolving letter of credit
CLINKER - Prices start at USD 60/MT trans RDLC Commissions beyond USD 1/MT to be doubled and split 50/50 with Seller Standards:
US Standard ASTM-C-150 -
British Standard 12/1997
Euro Standard EN 197/2000
Customer Specified Standard Packaging: Customers may elect bulk delivery of either cement or clinker in sealed compartments; every shipment is insured against contamination and loss. Stacked on pallet and shrink-wrapped or packed in jumbo bags for sea transport. Jumbo Bags 1.0 mt 1.5 mt 2.0 mt Kraft Bagged 50.0 KG 42.5 KG 20.0 KG

NO one can guarantee these prices. This was posted on the 18th of June and is valid until the 17th of August. Prices have yoyoed enormously in that time period.
NO origin mentioned. Most countries can't export cement as they have a shortage (see Alibaba scam post)
(Any Safe World Port) is an absolute lie! Shipping from lets say Foshan to Durban will be a completely different price than shipping to Antwerp. No consideration is given to ship availability either. Furthermore, many world ports won't take cement ships (too messy or port is not deep enough).

Can anyone find any other discrepancies?

Dirty Cement

2007-08-07T15:55:00.000+02:00

Cement factories in southern China are the biggest culprit when it comes to the choking pollution that blankets the region.
Construction material producers in Foshan, a city in southern China's Guangdong province, contributed heavily to the sulphur dioxide, nitrogen dioxide, ozone and soot in the air, according to Wu Dui, a researcher at the China Meteorological Administration.
"Foshan is unique because it has the country's largest cluster of construction materials and ceramics factories emitting a large volume of pollutants through hundreds of stacks," Wu was quoted as telling the South China Morning Post.
His assertions were based the findings of a six month air-quality study through southern China's heavily industrialised Pearl River Delta, the report said.
Serious pollution blights large parts of China as a consequence of its rapid economic development and construction materials need.
According to the Guangzhou Marine Geological Survey heavy metals, oil, nitrogen, ammonia and other chemical materials are being pumped into the air to levels far higher than standards set by the State Environmental Protection Administration.
Belching factories, power plants and vehicles in the region have been blamed for chronic pollution that inundates Hong Kong, threatening its lucrative tourist industry and cloaking city's famous skyline in foul-smelling smog.
China is the world's biggest cement producer, recording a production of 1.05 billion tons in 2005.
The majority of the production currently comes from small factories, which are inefficient in energy consumption and have no environmental protection technology.

Recently new technology has been applied to new Cement factories in China to generate energy from the waste gases emitted during the cement maunfacturing process.
A report by the Netherlands Environmental Assessment Agency (19 June) claims that China is now the world's biggest emitter of carbon dioxide.

The new system uses the heat from waste gases produced in the kiln during the cement production process both to dry the cement and to heat water in a boiler that drives a turbine to produce electricity. Almost nothing is wasted.
This new system has helped one factory alone to cut carbon dioxide emissions by 20,000 tons annually by reducing the need to burn coal for power.

China's cement industry still consumes 44 per cent more energy per unit than in developed countries, and the rapid development of energy-intensive industries, such as steel, copper and electricity, offset these efforts at being cleaner.
According to the Netherlands Environmental Assessment Agency, both the soaring demand for coal to generate electricity and the surge in cement production have pushed China's recorded carbon dioxide emissions beyond those of the United States by eight per cent.

Sourcing Cement for USD 4.00

2007-08-07T00:41:00.000+02:00

Ahmadabad India: It is now almost USD2.00 cheaper to source 50 kilo bags of cement from China than to buy locally.

This is due to the recent abolition of various duties on cement imports in India.

Prices from China now vary between USD4.00 and 5.00 per 50 kilo bag of 42.5 portland cement.

Coming Soon: Pictures of our factories in China

This Scam Alert Was Actually Posted On Alibaba

2007-08-06T20:59:00.000+02:00

Our company (Alibaba) receives more than 100 inquiries per week from potential cement buyers from around the world. Unfortunatly, most (99%) of these "potential cement buyers" are crooks or wannabe agents, which simply waste everyone's time by submitting buying leads from companies they have found on other trade networks.
We strongly recommend to all sellers: Do NOT send any quotes without receiving an official LOI, including the buyers full and verifyable contact details. If you need verification, simply contact the Commercial Department of your Embassy in the country where the buyer is located. This way you can save yourself a lot of trouble.
So scams work both ways in the cement business.

So is anyone honest out there?

New Cement Factory To Be Built In Jordan

2007-08-06T16:21:00.000+02:00

KHD Humboldt Wedag International Ltd. , announced earlier today that it has won a $110 million contract to build a new cement production plant with a capacity of 5,000 tonnes of clinker per day from Saudi Arabia-based Arabian Cement Company, one of the major cement players in the Middle East. The contract covers the design and equipment supply for Arabian Cement's Katrana Cement factory. KHD will also supply the mechanical, electrical and automation equipment for the entire cement production line for the new plant, to be located in Katrana, Jordan, 90 kilometers south of the Jordanian capital Amman.
KHD Humboldt President and CEO Jim Busche commented, "As one of the leading engineering services companies in the world, KHD has enjoyed a long business relationship with Arabian Cement Company. We are proud to continue that relationship with this new project."
The KHD proprietary scope of supply for this plant includes a five-stage, double-string preheater with a PYROCLON(R) Low NOX calciner complete with PYROTOP(R), tertiary air ducts, a three-stage rotary kiln with a PYROJET(R) burner. In addition, KHD will supply its new clinker cooler, the PYROFLOOR(R) cooler as well as two closed circuit PYRO CRUSHER(R) ball mills for clinker grinding.

About KHD Humboldt Wedag International Ltd.
KHD Humboldt Wedag International Ltd. (the "Company") owns companies that operate internationally in the industrial plant engineering and equipment supply business, and specializes in cement, coal and mineral industries.

Cement Price CIF Dubai

2007-08-06T11:24:00.000+02:00

This is the latest Price I have for 42.5 Portland Cement SAB certified: USD 92.00 MT CIF Dubai. This price is subject to change due to demand or ship availability.

Cement Prices

2007-08-06T08:17:00.000+02:00

OK I know that the title of this blog is cement prices worldwide and I have yet to publish a price for cement. The prices of cement are changing daily and differently depending on the region. I'm considering publishing daily or weekly ex factory costs and perhaps a few prices CIF for popular ports. Hopefully this can start in the next 3-5 days. In the meantime I will continue to give you cement and clinker news from around the globe. Please give me your input.

Proposed Cement Consolidation in Kenya

2007-08-06T08:13:00.000+02:00

The Kenya government has received a proposal for the merger of the two largest cement producers in Kenya, Bamburi Cement Ltd and East Africa Portland Cement Ltd, marking the beginning of what could be the most comprehensive restructuring of the cement industry in Kenya in years, with ramifications likely to be felt throughout East Africa.
If the proposal for the merger — which, incidentally, is supported by East Africa Portland Cement — is approved, French cement conglomerate Lafarge, the most influential player in the region with plants in Kenya, Uganda and Tanzania, will have a chance to consolidate its interest in the region.
The new development points to a thawing of relations between Lafarge and the government, which until fairly recently was still pressing the French conglomerate to relinquish part of its stake in East Africa Portland Cement, arguing that its involvement in the shareholding of the three major producers in Kenya constituted a conflict of interest.
Lafarge has a 41 per cent stake in East Africa Portland and a 17 per cent stake in Athi River Mining Ltd even as it retains a controlling stake in Bamburi — allowing it to enjoy a strategically dominant position in the cement industry in Kenya with representation in the boards of all three cement manufacturers.
In Uganda, the French company has a controlling stake in Hima Cement Ltd, while in Tanzania, one of the major cement producers, Mbeya Cement Ltd, is a subsidiary.
The merger is being supported on the grounds that the two big producers have to merge to create one strong East African champion capable of fending off competition from cement exporters from Southeast Asia, India, the Middle East and Egypt.
East Africa currently remains a high-cost cement producer, partly due to high electricity prices, exorbitant freight costs, high fuel costs and inefficient railway systems, but mainly because the market has for many years been sheltered from competition by high trade barriers.
Although cement companies have over the years been making profits, the industry has been protected by both a 25 per cent import duty plus a 30 per cent suspended duty.
The merger proposal is based on the grounds that this level of protection is unlikely to be sustained in the near future. Under the Customs Union of the East African Community, these duties must be reduced to zero by the year 2010.
Indeed, cement manuf-acturing in the region operate with high fixed costs that are linked to the relatively small sizes of cement plants in the region, thus compounding the problem of high production costs.
The consequence has been ever increasing consumer prices of cement in the region, the impact of which has been that per capita cement consumption in East Africa is one of the lowest in Africa.
According to industry estimates, Kenya’s annual per capita consumption stands at 54 kilogrammes; in Tanzania, it is 37kg in Uganda 32kg. South Africa’s per capita cement consumption is estimated at 200kg.
Clearly, the regional cement market is ripe for consolidation. What is surprising is that even in the face of these grim statistics, recent developments show that the cement industry in East Africa is progressively moving away from consolidating.
Instead of consolidating, nearly all individual cement producers in East Africa are acting as if oblivious to the increasingly hostile international environment they have to operate in.
Each of the major players is currently involved in a race to increase its own market share, spending millions of dollars in costly capacity expansion programmes.
In Kenya, medium producer Athi River Mining Ltd has only recently commissioned an additional kiln in Mombasa. In Uganda, Bamburi is progressing with doubling of the capacity of its Hima plant, while Tororo Cement is moving into the Kenya market with plans to erect a clinker plant in Mombasa and a grinding station in Nairobi.
In Kenya, East Africa Portland is spending millions of dollars to enhance its cement production output, while Bamburi is planning a multimillion dollar greenfield plant.
Yet it is clear that even after the completion of the new plants and facilities, the capacities of cement producers in East Africa will still remain small and comparatively inefficient compared with the big exporting facilities of Southeast Asia.
Several other factors are likely to conspire to keep cement production costs high in the near future while eroding the industry’s position vis a vis imports.
First, it is now estimated that ocean freight rates — which are currently at an all-time high, thus providing artificial protection — will drop by $10-15 in the next five years.
Secondly, with Kenya aggressively modernising its Mombasa port and Tanzania developing its Tanga Port facility to include cement import terminals, inefficiencies and delays in East African major ports will no longer provide the local cement producers with the artificial protection they have been enjoying.
Thirdly, all indications are that the three East African economies of Kenya, Uganda and Tanzania are entering a regime of consistently higher power tariffs.
Fourth, industry experts say that big new low-cost producers from the Middle East are planning a new offensive in the East Africa market very soon. They cite the case of Saudi Arabia, which alone is in the advanced stages of completing 18 cement factories currently under construction.
According to industry estimates, the cement plants in East Africa will have to reduce their manufacturing costs by at least $20 per tonne to survive competition from low-cost producers from the Middle East.
This will require production plants to reach a critical size and streamline the location of their manufacturing plants to minimise logistics — the type of restructuring that is only possible if the existing businesses merge.
The current projections are that the merger of Bamburi and Portland Cement will lead to an entity with a market share of 55 per cent in East Africa — especially after Lafarge’s stake in Mbeya Cement becomes part of the merged regional operation.
Industry sources also believe that the merged company will have the financial and strategic muscle to reach into other inland markets including the Democratic Republic of Congo, Rwanda, Burundi and Southern Sudan.
Proponents of the merger also say that with Bamburi’s sound financial standing in the Kenyan capital markets and ability to raise funds, a merger with East Africa Portland can be achieved at a very low cost and without compromising the interests of the government.
Indeed, Bamburi remains the best candidate for the merger with Portland, because no third party can provide the same synergies, especially considering that the respective production facilities of Portland and Bamburi fit into each other as a result of the tight grid of cement facilities in Mombasa, Nairobi, and Uganda.
How is the merger to be effected? Five proposals have been advanced:
First, allow the current shareholders of East African Portland wishing to exit to receive sale proceeds either in cash or shares.
Second, integrate Lafarge’s stake in Mbeya into the new company.
Third, offer a sales premium by maximising the assessed value of East African Portland through the combination of its current value with a projected value generated by the potential synergies with Bamburi.
Fourth, maintain or increase the local shareholding stake in the merged company.
Finally, consider cross listing of the new company on the three East African stock exchanges.

Cement Demand in Africa on the Rise

2007-08-04T16:33:00.000+02:00

The South African residential property market registered an exceptional performance over the past number of years, especially since 2000. The main support for this performance came from real economic growth of around 4% per annum during this period, which was driven by factors such as declining inflation, the lowest interest rates in decades and strong growth in real household disposable income; a rapidly growing middle class (boosting the demand for housing); and a range of other economic, social, cyclical and structural factors.The combined effect of these factors caused the demand for new and existing housing to increase significantly over this period. The growing demand, especially for new housing, but also for renovations to existing residential properties, caused growth in real value added in the building and construction industry to increase from 5,6% in 2000 to 13,3% in 2006. This was the highest level of real growth recorded in this sector of the economy since the early 1970s.As a result of the increased levels of building and construction activity in South Africa, this sector’s demand for building materials and skilled labour has increased significantly. The domestic demand for cement is a case in point. Sales jumped by a total of 58,6 % from 8,99 million tons of cement in 2000 to 14,26 million tons in 2006. This had local cement producers running at full capacity. Cement is currently being imported in an attempt to satisfy the growing demand.Apart from boosting the building and construction industry, the housing sector boom of the past few years was also instrumental in increased growth in output and levels of employment in many related industries and professions, fixed capital formation in the economy, financial sector expansion, and significantly higher levels of central and local government revenue.The economic impact of the strongly performing residential property market has been positive, but the country’s natural resources and economic infrastructure have come under immense pressure, while levels of environmental pollution have increased.A property market related natural resource which has become increasingly scarce in recent years as a consequence of mushrooming residential developments, is serviced land suitable for housing. The number of new housing developments escalated sharply because of the strong demand for housing, which exacerbated urban sprawl and increased pressure on the availability of suitable vacant development land serviced with water, sewage, electricity and road infrastructure. This was especially the case in the country’s rapidly growing urban areas.This article focuses on the quest for land for new housing developments in South Africa. The analysis starts by defining the segments of new housing and the categories of household income used in the calculations. This is followed by an overview of trends in the most important influencing factors: from demographics to economic indicators. An analysis of the trends in some major residential land related indicators concludes the article, touching on aspects such as the provision of municipal services; the redevelopment and rezoning of land; higher-density housing; the status of vacant land being developed; land values; the ratio of land values to prices of new houses; the affordability of land; and stand size in respect of new housing.

This effect is starting to be felt in other parts of the African continent. Zambia and Zimbabwe are also facing cement shortages.

We are importing Cement and clinker from China now. The biggest hurddles we face are high shipping prices, lack of cargo availability and we face unreliable ports in Africa.

We would be keen to hear your comments.

Zimbabwe Cement Shortage

2007-08-03T11:35:00.000+02:00

Zimbabwe is facing a cement shortage following a cement manufacturing giant's decision to halt production for the local market in protest against the government order to roll back the prices.
Authoritative sources said last week Portland Holdings Limited (PHL) had ceased production after incurring huge losses when they sold the cement at pre-June 18 levels, as ordered by the government.

The largest cement producer is part of South Africa's Pretoria Portland Cement (PPC).
Production was reported to have been hampered by high input costs and unrealistic prices which led to a temporary shutdown of operations at one of their subsidiaries, Colleen Bawn.
Colleen Bawn has stopped supplying clinker, an important component used in the manufacture of cement to its cement plant, Portland Holdings Limited (PHL) in Bulawayo.
This has led to the loss of jobs for contract workers at the manufacturing plant at PHL as operations at the plant have ground to a halt in the absence of clinker.
There are now fears more workers could lose their jobs.
Sources indicated Colleen Bawn was now supplying clinker to its South African-based arm, Pretoria Portland Cement (PPC) for the manufacture of cement. Zambia is also being supplied with the product.
"Reduced profit due to price cuts and unrealistically low retail prices has forced the manufacturing company to limit its production of clinker for export to countries such as South Africa and Zambia," said an official at the company.
"More than 100 contract workers were laid off last week as the manufacturing company suspended production of clinker to Portland Holdings Ltd in Bulawayo."
Officials at Colleen Bawn referred inquiries to John Lawne, the head of Bulawayo's Portland Holdings Limited, but he refused to comment on the impact of the recent price slashes, referring questions to the managing director in South Africa.
The MD, Trevor Barnard confirmed from South Africa where he was meeting with Pretoria Portland Cement (PPC) officials, the price cuts had "heavily affected" their operations.
But he said operations at Colleen Bawn "have been halted due to a breakdown of equipment". He refused to take more questions.
Meanwhile, the government has been forced to withdraw charges against businesses it had dragged to court for defying its order to roll back prices after it emerged that they were charged before the prices became law.
Companies which were first brought to court at the inception of the blitz, charged under the Statutory Instrument 142 of 2007, had charges against them withdrawn on Tuesday after plea after it emerged that they were charged prior to date when the instrument became law.
This came out at the appearance before Bulawayo Magistrate Loveness Chipateni of companies and directors dragged to court on charges of failing to comply with a government directive on price cuts.
According to Chipateni, the taskforce pounced on the companies and their directors after the Minister of Industry and International Trade, Obert Mpofu, announced the slashing of the prices, but before it had become law on 6 July.

Daily Cement News From Around the World

2007-08-02T16:52:00.000+02:00

MUMBAI - India's July cement production increased, due to capacity additions by a few domestic cement manufacturers and as last year's volumes for the month of July were low.
'It's just the low base effect for some cement majors,' said Rakesh Arora, associate director of Macquarie Securities, explaining the year-on-year rise in production.
Also, most cement manufacturers have been operating at about 100 pct capacity, analysts said.
'The increase in production is due to units added by some of the cement companies,' said Sneha Rungta, a research analyst at Religare Securities. He said ACC Ltd had set up a unit at Lakheri in the western Indian state of Rajasthan and Ambuja Cements Ltd commissioned its cement grinding unit at Farakka in West Bengal in the past year.
Rungta attributed the rise in cement despatch in the month to the construction activity picking up in southern and northern India.
ACC said its cement production for July rose to 1.63 mln tonnes from 1.47 mln tonnes in the same month last year, while its dispatches increased to 1.64 mln tonnes from 1.43 mln tonnes.
Ambuja Cements said its cement production for July rose to 1.40 mln tonnes from 1.18 mln tonnes in July 2006, and its cement despatches increased to 1.39 mln tonnes from 1.16 mln tonnes.
The Aditya Birla Group's cement production for July rose by 9.13 pct to 2.39 mln metric tonnes, while dispatches moved up by 13.10 pct to 2.40 mln mln tonnes.